Nature and Concept of Organisation | Commerce & Accountancy Optional Notes for UPSC PDF Download

Concept of Organisation

• Organizing is the process of identifying and grouping activities, establishing authority and responsibility relationships to facilitate effective collaboration in achieving enterprise objectives. In a broader context, organizing involves arranging resources like manpower, materials, machines, and money needed by an enterprise to reach its goals. In a more specific operational sense, organizing entails defining the duties and responsibilities of employees and determining how their activities should be interconnected. 
• The ultimate outcome of organizing is the establishment of a structure outlining the duties and responsibilities of individuals in various positions, grouped based on the similarity and interrelated nature of their tasks. In essence, organizing results in the formation of an organization, where a group of people collaborates to achieve common objectives. According to Robins, an organization is a consciously coordinated social entity with a distinct boundary, operating continuously to accomplish shared goals. 
• In summary, an organization is both an economic and social entity where individuals work collectively to achieve predetermined goals, fulfilling personal objectives like socioeconomic satisfaction that may be challenging to attain individually. It functions as a systematically designed structure that enables participants to work efficiently toward a common goal.

The characteristics of an organisation are as follow:

• Group Formation: An organization comes into existence when a collective of individuals collaborates for a shared purpose and actively contributes to their joint endeavors.
• Work Division: The establishment of an organization entails breaking down the overall workload into various activities and functions, and allocating tasks to individuals based on their skills, abilities, and experience.
• Shared Purpose: Each organization originates from the enterprise's goals, distinct from the personal objectives of its employed individuals. The organization's common purpose forms the foundation for cooperation among its members.
• Vertical and Horizontal Relationships: Organizations foster cooperative relationships within different departments and divisions, as well as between superiors and subordinates. Various functions and activities, such as production, marketing, and finance, are integrated to ensure effective coordination. The duties and responsibilities of superiors and subordinates in each department or division are also unified to serve the purpose of their collaborative efforts.
• Chain of Command: The relationships between superiors and subordinates in an organization are structured based on authority flowing from higher levels of management to lower levels, creating a hierarchical chain known as the chain of command. This chain also dictates the communication lines within the organization.
• Organizational Dynamics: In addition to the structural relationships grounded in activities and functions, organizations involve interactions shaped by the sentiments, attitudes, and behavior of individuals and groups. These relational aspects contribute a dynamic element to organizational functioning, susceptible to change over time.

Importance of Organisation

Effective organization is crucial for the sustained success of an enterprise, and its significance is outlined below:

• Facilitates Administration: A well-structured organization aids management in consistently aligning resource flows with overall objectives. It serves as a foundation for performing planning, direction, coordination, motivation, and control functions.
• Facilitates Growth and Diversification: Sound organization supports organizational expansion and diversification. Clear division of work and proper delegation of authority contribute to growth. As the organization grows, a more flexible decentralized structure can replace functional types.
• Permits Optimum Use of Resources: A sound organization allows the optimal utilization of technical and human resources. It enables the incorporation of the latest technological advancements and facilitates the best use of human efforts through specialization. Moreover, it promotes people development through training and promotion opportunities, providing strength to meet evolving needs.
• Stimulates Creativity: Specialization, clear lines of authority, and responsibility provided by a sound organizational structure empower managers to focus on crucial issues, fostering creativity among individuals.
• Encourages Humanistic Approach: Organizations that promote a humanistic approach facilitate teamwork and avoid treating employees as mere robots or machines. Job rotation, enlargement, and enrichment are incorporated to suit human needs, making jobs meaningful and interesting. Efficient methods for employee selection, training, remuneration, and promotion, along with delegation and decentralization, contribute to higher job satisfaction.

While recognizing the importance of organizational structure, it's crucial to note that a sound structure alone doesn't guarantee success. According to Drucker, a good organizational structure, like a good constitution, doesn't guarantee outstanding performance. However, a poor organizational structure makes achieving good performance impossible, regardless of individual capabilities.

Steps in the Organisation Process

The process of organizing involves a series of interconnected steps:

• Defining Objectives: Organization is closely tied to specific objectives, making it imperative for management to identify these objectives before initiating any activity. Clear objectives guide the management and workers, fostering unity of direction within the organization.
• Identification and Grouping of Activities: To ensure effective collaboration among group members, there must be a proper division of major activities. Each job should be accurately categorized and grouped, enabling individuals to understand their roles within the group and avoiding redundant efforts. For example, within an industrial organization, overarching functions like production, purchasing, marketing, and financing can be further subdivided and classified.
• Assignment of Duties: Once activities are classified and grouped into various jobs, they should be assigned to individuals based on their capabilities. Each person should be given a specific job, along with the responsibility for that task. Adequate authority should also be granted to enable effective task completion.
• Establishing Relationships: With numerous individuals working in the organization, management bears the responsibility of defining the structure of relationships within the organization. Clarity regarding accountability ensures smooth operations by facilitating the delegation of responsibilities and authority.
• Integration of Activity Groups: Integration across all activities is essential and can be achieved through various means, including authority relationships (horizontal, vertical, and lateral) and organized information or communication systems. Effective coordination and communication contribute to achieving unity of objectives, fostering teamwork, and cultivating team spirit among different activities.

Principles of Organisation

The principles of organization serve as guidelines for designing an efficient organizational structure.
Let's delve into the essential principles:

• Unity of Objectives: An enterprise aims to achieve specific objectives, requiring the organization and its parts to be aligned with these goals. Every member should understand and work towards these common objectives, ensuring a concentrated effort on set goals.
• Division of Work and Specialization: Work within the organization should be divided to assign each individual to a specific job, promoting specialization for increased efficiency and quality. Specializations, though distinct, should be coordinated for overall integration.
• Definition of Jobs: Each position in the organization should have a clear definition in relation to others, with well-defined duties, responsibilities, and relationships to prevent overlapping functions.
• Separation of Line and Staff Functions: Whenever possible, separate line functions, crucial for achieving main objectives, from staff activities, such as personnel and plant maintenance, which support these functions.
• Chain of Command or Scalar Principle: Clear lines of authority should run from the top to the bottom of the organization to facilitate delegation and decision-making. This is known as the scalar principle or the chain of command.
• Parity of Authority and Responsibility or Principle of Correspondence: Authority should correspond to responsibility, ensuring that each subordinate has sufficient authority to fulfill their entrusted responsibilities.
• Unity of Command: Each individual in the organization should report to a single supervisor to avoid confusion, conflicts, and lack of action. The principle is known as unity of command.
• Unity of Direction: Activities with a common goal should be managed by one person, ensuring a single head and plan for various activities working towards a common objective.
• Exception Principle: Higher-level managers should handle exceptional matters, while routine decisions are best made at lower levels. Policy decisions and unusual matters should be referred to higher levels.
• Span of Supervision: Managers or supervisors should not be burdened with supervising more subordinates than they can effectively manage within the limits of time and ability.
• Principle of Balance: A proper balance should be maintained between different parts of the organization, as well as between centralization and decentralization, span of supervision, lines of communication, and authority at various levels.
• Communication: Effective communication is crucial for organizational success. While the line of authority provides channels, a robust communication network, built on confidence and two-way communication, ensures the organization operates effectively.
• Flexibility: The organization's structure should be flexible, allowing easy and economical adaptation to changes in business nature and technological innovations without disrupting the basic design.
• Continuity: The organization structure should be designed to endure and adapt to changes over time, reflecting the evolving nature of the business environment while maintaining its ability to achieve long-term objectives.